Week 4 Q1 2024 - Review
Early rate cuts narrative loosing steam with optimistic US data
The FEDs blackout week before FOMC came with signs of early rate cuts narrative loosing steam as we kept receiving overall optimistic US data across the board. We got healthy PMI flash data, optimistic GDP, poor Durable Goods and PCE increase within expectations.
As we can see the first half of the week was quiet in terms of economic events as we also didn’t had any Red Sea escalation tensions. The second half of the week was more active as we had healthy figures on flash S&P PMI services, composite and manufacturing. All of them with reports above expectations and the 50 grade point which shows that US economy still tight. On Thursday we had a lot of data reports (unfortunately we were not able to provide in advance the week overview) and the risk of such is that there is high chance to have mixed data, which happened unfortunately, but we had good GDP reports and a surprisingly low readings on Durable Goods as our expectations on this report was to decrease a bit but well above forecast because we have had healthy figures for Industrial Production, Retail Sales and also on consumer sentiment side, although data came even below minimum forecast which revealed to be a complete surprise. With such mixed data reports markets reacted accordingly, as we will see later, and on Friday with PCE readings within expectations didn’t brought much making economists and investors to wait for the next important week to come.
On the markets point of view we know and already stated that Gold has been bullish since October with Israel-Hamas conflict and then November with the early rate cuts narrative coming into play, but since the beginning the 2024 it has been with a normal corrective structure and since last week we identified that the narrative was loosing steam due to the healthy US economic data and still high inflation readings.
With a new low printed last week, expectations for the week that was already gone were if Gold was able to be traded below 2020s and potentially keep printing new consecutive LL. Although we only had on Wednesday on sided data that indeed made gold to trade below 2020s and with the mixed data on the next days just kept hovering such area of interest. On the other side, DXY, kept the same behavior as last week ranging within 103.1s and 103.7s making fakeouts on both sides of the range. Such mixed and expected data made markets to be on sidelines leveling both buyers and sellers to wait for Jerome Powell Speech and labor data next week.
Other relevant CB events that occurred this week was the rate decision by ECB and BoJ and both kept the same stance. On one side BoJ kept with their ultra loose monetary policy, as expected, with stimulus to the economy as we also received reports on Tokyo CPI was still very low and ECB kept the rates unchanged as inflation readings on EA is still overall high.
Not much to add on, as now the focus will be for the next week to come with important US data like FOMC and labor data.
Have a great weekend, reset and refresh.